Probing deeper into the poverty picture, this Policy Note examines the extent, composition, and characteristics of the poor, using various rounds of the Family Income and Expenditure Survey (FIES) and Annual Poverty Indicator Survey (APIS) as panel data sets. Understanding these aspects could provide insights that may guide the government in formulating specific types of interventions for different groups of households, especially the chronic and transient poor.Philippines, chronic poor, transient poor, panel data

Asis, Ronina D.

Datu, Maria Blesila G.

Mina, Christian D.

Reyes, Celia M.

Tabuga, Aubrey D.

English

Research Papers in Economics

Understanding the extent, composition,
and characteristics of the poor
Celia M. Reyes, Christian D. Mina,
Aubrey D. Tabuga, Ronina D. Asis,
and Maria Blesila G. Datu
Philippine Institute
for Development Studies
Surian sa mga Pag-aaral
Pangkaunlaran ng Pilipinas
Policy Notes
No. 2011-06 (April 2011) ISSN 1656-5266
PIDS Policy Notes are observations/analyses written by PIDS researchers on cer-
tain policy issues. The treatise is holistic in approach and aims to provide useful
inputs for decisionmaking.
This Notes is mainly drawn from PIDS Discussion Paper No. 2010-30 titled “Chronic
and transient poverty” by the same authors. The authors are Senior Research
Fellow (C. Reyes); Research Associates (C. Mina and A. Tabuga); and Senior
Research Specialists (R. Asis and M.B. Datu), respectively, at the Institute. The
views expressed are those of the authors and do not necessarily reflect those of
PIDS or any of the study’s sponsors.
T he 2010 Philippine Millennium
Development Goal (MDG) Report noted that the
country has been posting a medium rate of
progress in terms of meeting the MDG target for
poverty reduction. Since there are only a few
years left before the MDG deadline, collaborative
efforts among the different sectors should thus
be geared toward achieving the 2015 target.
This is particularly important because the
country has recently been challenged by a
number of economic and natural shocks which
include the food and fuel price hikes in 2008,
the global financial and economic crisis that
reached the country in the latter part of 2008,
and the devastating typhoons Ondoy and
Pepeng that hit the country during the last
quarter of 2009, followed by the El Niño
phenomenon in the latter part of 2009.
Many households are considered vulnerable to
various shocks. Using a panel data from the
1997 Family Income and Expenditure Survey
(FIES) and 1998–1999 Annual Poverty
Indicator Survey (APIS), Reyes (2003) found
that a high proportion of households were
adversely affected by the 1997 Asian financial
crisis and the 1997/1998 El Niño and La Niña
episodes, which caused them to move in and
out of poverty during that period. Addressing
poverty caused by transitory shocks requires
different types of intervention.
In this regard, this Policy Notes looks into the
extent and composition of poverty, and
provides some idea on the basicPN 2011-06
2
Policy Notes
characteristics of the poor in recent years. It
also presents some insights that could guide
the government in the formulation of specific
types of interventions for different groups of
households, especially the chronic and
transient poor.
Probing deeper into the poverty
picture: the panel data
Using various rounds of the FIES and APIS
from 2003 to 2008, three different panel data
sets were generated using exact matching.
The FIES panel data set, covering the periods
2003 and 2006, includes 7,899 households
while the APIS panel data set, covering 2004,
2007, and 2008, contains 7,446 households.
The 5-year panel data set, which is a
combination of the FIES and APIS panel data
sets, consists of 6,574 households.
What is chronic and transient poor?
Reyes (2003) further classified the poverty
status of households into four categories
depending on their poverty status in each of
the covered years. The chronic poor are those
who are consistently income-poor during the
period under study. The transient poor refer to
those who are classified as poor during a
given point in time but were previously
nonpoor for at least one year during the
period under study. The previously poor are
those who are classified as nonpoor during a
given point in time but were previously poor
for at least one year during the period under
study. The transient and the previously poor
are those who are moving in and out of
poverty. Meanwhile, the never poor refer to
those who had never been poor during the
period under study.
What is the extent and composition of the
poor?
Reyes et al. (2010) found that the transient
poor comprises a significant portion of the
poor. Their share to the total poor increases
as the period under study is extended. The
probability of falling into poverty increases
because more and more households may
become vulnerable to shocks as more periods
are placed under study.
For instance, using the FIES panel, about one-
fifth (20.4%) of the panel households are
considered chronic poor while 10.4 percent
were transient poor from 2003 to 2006 (Figure
1). One out of every three who were classified
as poor in 2006 was previously nonpoor.
Using the APIS panel, the chronic poor during
the periods 2004, 2007, and 2008 accounted
for 17.2 percent of all the panel households
(Figure 2). Interestingly, the proportion of the
transient poor during this 3-year period is
relatively higher (at 33.9%) than that in the
FIES panel. Using the combined FIES and APIS
panel, 12.4 percent of the households had
remained poor from 2003 to 2008 while a
considerable 42.7 percent of them had been
moving in and out of poverty over the 5-year
period (Table 1). From 10.4 percent in the
FIES panel (2-year period) to 33.9 percent in
the APIS panel (3-year period), the proportion
of the transient poor is seen to increase to
42.7 percent when a longer panel (5-year
period) was used.PN 2011-06
3
Policy Notes
What are the basic characteristics of
the poor?
The patterns observed with regard to the
characteristics of the poor are consistent
across the three different panel data sets
as seen below.
Location. The chronic and the transient
poor are mostly found in Mindanao
(specifically Caraga, Autonomous Region in
Muslim Mindanao [ARMM], and Zamboanga
Peninsula) while the majority of the
nonpoor households are located in Luzon
(particularly the National Capital Region
[NCR]; Cavite, Laguna, Batangas, Rizal,
Quezon [CALABARZON]; and Central
Luzon). In addition, the chronic poor are
mostly rural dwellers while the never poor
are usually located in urban areas. Another
interesting finding in terms of location is
that a large number of the transient poor
are found in Luzon.
Household head profile. The proportion of
female-headed households is highest
among the never poor while lowest among
the chronic poor.
Heads of the chronic and transient poor are
relatively younger than those of the never poor.
The educational attainment of heads seems
to increase with income. More than half of
the chronic and transient poor have heads
who did not reach secondary level while more
than half of the never poor have heads who
were at least high school graduates.
Figure 1. Movements in and out of poverty of FIES panel
households, 2003 and 2006
Note: The figures refer to the share of the population subgroup to the total number of house-
holds in the panel data set. Thus, the percentages for each year add up to 100.
Source of basic data: Matched files of the 2003 and 2006 Family Income and Expenditure
Survey (FIES).
The majority of the chronic poor heads are engaged in
agriculture while few of them do nonagriculture work. In
contrast, more than half of the never poor have heads whose
Figure 2. Movements in and out of poverty of APIS panel
households, 2004, 2007, and 2008
Note: The figures refer to the share of the population subgroup to the total number of households
in the panel data set. Thus, the percentages for each year add up to 100.
Source of basic data: Matched files of the 2004, 2007, and 2008 Annual Poverty Indicator
Survey (APIS).PN 2011-06
4
Policy Notes
jobs/businesses are nonagriculture-related
while less than 50 percent of them have
heads who either have agriculture-related
jobs/businesses or no work at all.
In terms of occupation of household heads,
more than half of the panel households have
heads who are farmers, fisherfolks, or forestry
workers. This is the largest among the major
occupational groups of households. The
second largest group includes laborers and
unskilled workers, which accounted for about
one-fourth of the total panel households,
followed by trade and related workers with 7
percent, and then plant and machine
operators and assemblers, with 4 percent.
Household composition and income. Chronic
and transient poor households are relatively
larger and usually have higher dependency
ratio compared to the never poor. The chronic
and the transient poor tend to have five to six
members on the average while the never poor
households are usually composed of four members.
Similarly, the chronic and transient poor have
around four to five dependents (members
aged below 15 years old) out of every 10
members while the never poor only have
about two dependents for every 10 members.
Roughly 80 percent of households with at
least one member being an overseas Filipino
worker (OFW) are considered as never poor
while only about 7 and 4 percent of such
households are chronic and transient poor,
respectively.
The chronic poor reported the highest mean
percentage of income derived from
agriculture, followed by the transient poor.
Around 56 percent of the total income of the
chronic poor is derived from agricultural
sources whereas for the transient poor, the
share is about 45 percent. In contrast, only
about 18 percent of the total household
income of the never poor is derived from
agricultural sources/activities.
Interestingly, percentage changes in income
are evident among the transient and
previously poor, or those who are moving in
and out of poverty. For instance, the majority
(82.1%) of the transient poor experienced a
decrease in income by up to 60 percent from
2003 to 2006. In contrast, the income of the
majority of the previously poor increased from
40 to more than 100 percent.
Ownership of assets, access to basic amenities
and social services, and housing characteristics.
The chronic and the transient poor possessed
very few assets. Among the leading assets
commonly owned by these poor households
are radio and television sets, followed by sala
Table 1. Distribution of 5-year panel
households, by poverty
status, 2008 (unweighted)
Poverty status Percent
Chronic poor 12.4
Transient poor 21.3
Previously poor 21.4
Never poor 44.9
Source of basic data: Matched files of the 2003 and
2006 FIES; and 2004, 2007, and 2008 APISPN 2011-06
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Policy Notes
set, telephone/cellular phone, and VTR/VHS/
VCD/DVD player. Other high-priced assets such
as computer, airconditioner, vehicle,
refrigerator, and washing machine were visible
only among nonpoor households, particularly
the never poor.
Access to basic amenities (e.g., electricity,
safe water, sanitary toilet facilities) is also
seldom present among poor households,
especially the chronic poor. In addition, the
proportion of households with access to the
PhilHealth program is higher among the
nonpoor than the poor. Around 33.8 percent
of the previously poor and 52.9 percent of the
never poor have access to the program. On
the other hand, only 26 percent of the
chronic poor and 24.9 percent of the transient
poor have at least one member who is a
PhilHealth beneficiary.
Households living in makeshift housing and
informal settlements comprised a small
percentage of the total households in the
panel. Notwithstanding this, the proportions
are slightly higher among the chronic poor
and the transient poor than among the
previously poor and the never poor.
Policy implications
Identifying the extent, composition, and
characteristics of the poor is very critical in
designing effective poverty reduction
programs. This is particularly true in
developing countries like the Philippines
where budgets for social programs are limited.
Thus, proper targeting system should be
adopted to ensure that greater resources are
channeled to target beneficiaries, particularly
those in poor and underserved areas.
Recently, there have been efforts toward more
targeted interventions for the poor. However,
there has been no distinction between
chronic and transient poor. For instance, the
Pantawid Pamilyang Pilipino Program (4Ps) or
the Conditional Cash Transfer (CCT) Program
utilized a two-step targeting scheme, with
geographical targeting at the first stage and
household targeting at the second stage.
Although socioeconomic conditions of
households are assessed at the second stage,
poor households are treated here as a
homogeneous group. None of the previous
programs, however, has made a serious effort
in delineating the kinds of interventions
necessary for various types of poor
households.
The major finding of Reyes et al. (2010) is
that the poor are not a homogeneous group.
Those who are classified as poor at any point
in time consist of the chronic poor and the
transient poor. In fact, the transient poor
comprised a significant portion of the poor.
Identifying the extent, composition, and characteristics
of the poor is very critical in designing effective poverty
reduction programs. This is particularly true in
developing countries like the Philippines where budgets
for social programs are limited. Thus, proper targeting
system should be adopted to ensure that greater
resources are channeled to target beneficiaries,
particularly those in poor and underserved areas.PN 2011-06
6
Policy Notes
For further information, please contact
The Research Information Staff
Philippine Institute for Development Studies
NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City
Telephone Nos: (63-2) 894-2584 and 893-5705
Fax Nos: (63-2) 893-9589 and 816-1091
E-mail: creyes@mail.pids.gov.ph; cmina@pids.gov.ph; jliguton@mail.pids.gov.ph
The Policy Notes series is available online at http://www.pids.gov.ph. Reentered
as second class mail at the Business Mail Service Office under Permit No. PS-
570-04 NCR. Valid until December 31, 2011.
While the panel data sets used in the study
do not necessarily reflect the true
characteristics of the entire population across
years under study, the details of the above
finding provide an idea of the extent,
composition and characteristics of the poor in
the Philippines. The study, however, does not
intend to generalize the findings to the entire
population.
As suggested, the two groups of poor
households, namely the chronic and the
transient poor, need different types of
interventions. Longer-term investment
schemes are more appropriate in addressing
chronic poverty. These may include providing
assistance to chronic poor households that
will help increase their human and physical
assets or returns to those assets. On the other
hand, transient poverty may be addressed
through risk-mitigating, or insurance and
income stabilization, schemes. The transient
poor are considered vulnerable to various
economic and natural shocks so they have to
be protected against these shocks. The
government can also help the transient poor
cope with shocks. Programs that reduce risks
or help households manage the risks better
can be designed and implemented. This type
of intervention can help households from
falling into poverty.
Moreover, identifying the characteristics of
the different groups of households,
particularly the chronic and the transient
poor, can be of great help in designing
specific types of interventions. The chronic
poor tend to reside in the rural areas and are
engaged in agriculture. This suggests the need
for the poverty reduction strategy to focus on
the rural areas, particularly on agriculture.
The chronic poor also tend to have larger
family sizes. Better population management
therefore is a critical component of an effective
poverty reduction strategy. And finally,
education is an essential factor affecting the
poverty status of households. As such,
providing access to education is an effective
way of breaking the cycle of poverty. 
References
Orbeta, A.C. 2002. The impact of globalization on
employment in the Philippines. Philippine
Review of Economics 39 (2):1–36.
Reyes, C.M. 2003. The poverty fight: has it made
an impact? PIDS Perspective Paper Series No.
2. Makati City: Philippine Institute for
Development Studies.
Reyes, C.M., A.D. Tabuga, C.D. Mina, R.D. Asis, and
M.B.G. Datu. 2010. Chronic and transient
poverty. PIDS Discussion Paper No. 2010-30.
Makati City: Philippine Institute for
Development Studies.

Understanding the Extent, Composition, and Characteristics of the Poor

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